U.S. stock markets closed lower for the fourth successive days on Monday. Valuation of major indexes has fallen to the lowest level in five weeks. Market participants remained concerned about a recession in 2023. Rigorous interest rate hike by the Fed has dampened investors’ confidence on risky assets like equities. All the three major stock indexes ended in negative territory.
How Did The Benchmarks Perform?
The Dow Jones Industrial Average (DJI) tumbled 0.5% or 162.92 points to close at 32,757.54. Notably, 20 components of the 30-stock index ended in negative territory while 10 in positive zone. At its session low, the blue-chip index was down nearly 340 points.
The tech-heavy Nasdaq Composite finished at 10,546.03, sliding 1.5% or 159.38 points due to weak performance of large-cap technology stocks. The major loser of the tech-laden index was Atlassian Corp.
TEAM
, shares of which plummeted 5.5%. Atlassian currently carries a Zacks Rank #3 (Hold). You can see
the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
.
The S&P 500 tanked 0.9% to end at 3,817.66. All 11 broad sectors of the benchmark index closed in negative territory. The Consumer Discretionary Select Sector SPDR (XLY), the Communication Services Select Sector SPDR (XLC), the Materials Select Sector SPDR (XLB), the Technology Select Sector SPDR (XLK), the Utilities Select Sector SPDR (XLU) and the Real Estate Select Sector SPDR (XLRE) plummeted 1.9%, 2.6%, 1.9%, 1.6%, 1.2% and 2.3%, respectively.
The fear-gauge CBOE Volatility Index (VIX) was down 0.9% to 22.42. A total of 17.28 billion shares were traded on Monday, lower than the last 20-session average of 11.59 billion. Decliners outnumbered advancers on the NYSE by a 2.80-to-1 ratio. On Nasdaq, a 2.63-to-1 ratio favored declining issues.
Recession Fears Grip Markets
U.S. stocks continued to suffer on Monday, for the fourth consecutive days after the Fed announced a 50-basis point rate hike, with losses deepening. Stocks took a further hit as disappointing retail sales for November sparked fears of a slowing economy.
On Wednesday, the Fed increased interest rates by another 50 basis points. Fed Chair Jerome Powell had earlier hinted that the central bank could slow down its pace of rate hikes after increasing interest rates by 75 basis points for the fourth consecutive time since June.
The Fed did slow down the pace but Powell didn’t paint a rosy picture of the future and indicated that the central bank would continue increasing interest rates at regular intervals through 2023.
Wednesday’s hike took the benchmark range of 4.25% to 4.50%, and the Fed projected it to top out at 5.25% before it takes a call on pausing the hikes. This is higher than the September forecast of 4.75%.
Recession fears were further ignited after central banks in Europe also hinted at hiking interest rates through 2023. Both the Bank of England and the European Central slowed down their pace of rate hikes but increased interest rates by 50 basis points. Investors were once again alarmed by this as they believe that ongoing rate increases could push the economy into a recession, setting the tone for a panic sell-off.
Several major economic data like the retail sales, industrial production and ISM Manufacturing Index for November, severe devastation of the housing sector in 2022 due to soaring mortgage rate, growing business inventories and lower consumer sentiment are indicating significant cool down of the U.S. economy.
Economic Data
The National Association of Home Builders/Wells Fargo Housing Market Index came in at 31 in December compared with 29 in November. December marked the 12th straight month of declines and the lowest reading since mid-2012. Any reading below 50 is considered as negative. The index stood at 84 in December 2021.
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